This research work was designed to study fraud in the Nigerian banking industry. This study titled: fraud in the Nigerian banking industry: causes, consequences and solution. Case study of Union Bank of Nigeria Plc. The objective of the study is to find more realistic ways and means to minimize the occurrence of frauds in commercial banks. Relevant data for this research work were collected from both primary and secondary source of data. A 'descriptive method was used for this study. A sample size of 52 respondents were drawn out from the population using questionnaire instrument. The statistical instrument used in testing the validity of the hypothesis was chi-square. Among the major findings of the study was that bank frauds are committed by bank staff in collaboration with customers. Also, the study found' out that distress in the banking industry does 'not has direct relationship with the occurrence of frauds in banks. Furthermore, the result showed that good management control system, security and inspection do not totally eliminate incidence of bank fraud. The research therefore recommend that understand the causes, methods of fraud, bank must understand the causes, methods and motivation for fraud. Thus, because the causes of frauds and methods employed in fraud very with time, research on fraud should be carried out regularly, to keep track of the development in the field.


Content                                            Page

Title page    -    -    -    -    -    -    -    -    -    -    i

Approval    -    -    -    -    -    -    -    -    -    -    ii

Dedication    -    -    -    -    -    -    -    -    -    -    iii

Acknowledgement    -    -    -    -    -    -    -    -    -    iv

Abstract    -    -    -    -    -    -    -    -    -    -    v


1.1     Background of the Study

1. 2     Statement of the Problems

1.3     Research Questions

1.4     Objective of the Study

1.5     Research Hypothesis

1.6     Significance of the Study.

1.7     Scope and Limitations of the Study

1.8     Methodology of the Study

1.9     Organization of the Study


2.1      Introduction

2.2      Banks and Banking Concept

2.3     The Structure of the Nigerian Banking System

2.4      Definition of Concept of Frauds

2.5     Classification and Types of Banks Frauds

2.6     Causes of Fraud in Banks in Nigerian Banking Industry

2.7     Sources of Bank Frauds

2.8     Consequences of Bank Frauds

2.9      Measures for Controlling Fraud in Banks


3.0     Introduction

3.1     Population of the Study

3.2     Sample Size

3.3     Data Collection and Description of Instrument

3.4     Method of Data Analysis

3.5     Problems Encountered and Limitation of Study

3.6     Restatement of Research Questions

3.7     Restatement of Research Hypotheses


4.0     Introduction

4.1     Analysis of Variables of Basic Information

4.2      Analysis of Questionnaire

4.3     Test of Hypotheses


5.1      Summary

5.2     Recommendations

5.3      Conclusion






There appears to be little about the fact that fraud in banks is a matter of the greatest concern to bankers, the monetary/ political authorities and the generality of Nigerians today. It is so for many reasons. The methods acquire sophistication by the day. The size increases in geometric progression.

The people involved hitherto were among the respectable members of the church, the mosque, the community. Also, the results" of the incidences are damaging. Frauds lead to unwarranted losses for the banks and put the management and energies on fraud prevention and detection. Equally importantly, every incidence of bank fraud literally chips off a bit of the public's confidence in the orthodox financial institutions that banks are, and delay or slowdown the full development of banking habits in Nigeria.

Fraud in banks contains, largely, experiences of practitioners in the banking industry, people that have had to inevitably deal with the problem. It should therefore be a very useful of information to bankers of all grades, to students and to all interested in the minimization of fraud in our banks.(project topics   final year project topics )                                                 

In view of these, fraud is a number, one enemy to all concerned with the growth and development of the financial industry. Any effort to fight this enemy is therefore most desirable.


Frauds are not new in banks. They are as old as the industry itself. However, in recent times, the rate and frequency at which they occur have been a cause of great concern to management of all banks in Nigeria. Banks lose millions of naira in various frauds yearly and despite concerted efforts, by individual bank management and by the committee of Chief Inspectors on the one hand the Banker committee in the other, the wave of frauds in banks has continued to be on the increase. The attack on bank fraud by the fraudsters is as a result of the belief by many Nigerians that the banking sector is the most profitable sector of the economy. They believe that the banks make a lot of profit annually and are always liquid. Consequently, any amount of financial loss to a bank will not materially affect its existence. This is incorrect. The examination of the account of some banks, will show that some banks cannot even fully provide for loses sustained through fraud in their accounts.

The fear is now common that the increasing wave of fraud in banks in recent years, if not arrested may pose certain threat to the safety, survival and stability of individual's banks and their performance. It also results in huge financial in stability of individual banks and their performance. It also results in huge financial losses to both the banks and their customers as, well as loses of confidence in the affected banks, which eventually bring about their closure or liquidation or acquisition.


In the light of the foregoing, the following questions may be asked in this research work:

What is bank fraud and what are its venous nature, characteristics and methodology? Who and why does bank personnel commit fraud? Are there indicators to predict the occurrence of banks fraud? What are the opportunities (loopholes) in the management control system, which encourage bank fraud? To what extent would bank' fraud affects the bank in particular and the economy at large? What should be the role of bank examiner, the internal auditors and the general public in fraud prevention, detection and prosecution?

The needs to provide workable answers to this constitute the justification for the research workers.


Doubtless fraud has become a cankerworm that is eating deep into the system of the Nigeria financial industry consequently bringing dents on the reputation of the banks concerned arid reducing the level of confidence the public has in the entire banking system.

Therefore, the objective of this research work is to find more realistic ways and means to minimize the occurrence of fraud, if not absolutely eradicating frauds in banks. Other objectives of this research work are as follows:

•     To identify the causes of and opportunities (loopholes) for the perpetration of frauds in the Nigerian banking industry.

•     To ascertain the extent of the effect or dangers of fraud on the Nigerian banking industry.

•     To identify the type of fraud and the category or group of people' most especially within the banks who are likely perpetrators of frauds in the banks.

•     To identify measures that may be out in place for the prevention and detection of frauds in banks.

•     Recommendations need to be effectively implemented. Therefore one of the objectives of this research work is to identify means through which this could be done.


The following are the research hypotheses that were verified, testing their creativeness as assumption deduced with regard to the topic under review.

Hypothesis one

Ho:    Good management control system, security and inspection do not reduce the incidence of bank of frauds.

HA:    Good management control system, security and inspection do reduce the incidence of bank of frauds.

Hypothesis two

Ho:    Experienced bankers are more unlikely to be perpetrators of frauds in banks

HA:    Experienced bankers are more likely to be perpetrators of frauds in banks

Hypothesis three

Ho:    That bank frauds are not committed by the connivance of bank staff with customers

HA:    That bank frauds are committed by the connivance of bank staff with customers

Hypothesis four

Ho:    Frauds in banks does not have direct relationship with the occurrence of distress in the banking industry

HA:    Frauds in banks do have direct relationship with the occurrence of distress in the banking industry


Banking business has always been associated with some degree of fraud. This should not be surprising in view of the fact that money and near monies is the stock -in-trade in the banking industry. But this fact of association has nevertheless not made the incidence of frauds in bank less worrisome to bankers. In Nigeria, bankers are particularly concerned because frauds perpetration is on the increase and continues to acquire greater sophistication. More importantly, the news of frauds or attempted frauds dents the reputation of the banks concerned and reduces the level of confidence the public has in the entire banking system. All these have made the subject of frauds in banks a topical one that is widely and frequently discussed by bankers, the monetary authorities and the public at large in Nigeria today as it is, shall give full analysis and attention in this research work.

This research work will be my modest contribution to the discussion on how to reduce the incidence of frauds in our banks. It therefore commends these rich source of knowledge about a nagging problem to the Nigeria reading public. This research work is expected to:

Provide a comprehensive and instructive analysis of the subject of fraud Nigeria banks.

Provide expertise knowledge of banks frauds to banking practitioners particularly those in charge of the inspection and the design of management control systems.

Provide bankers with the knowledge of the negative consequences (effects) of fraud in banks so as to enable each staff to be watchdog of each other in its prevention.

This research work will hopefully be found useful by students, particularly of banking, the law enforcement agents that have the task of prosecuting fraud cases and practicing lawyers defending fraud cases.

Monetary authorities particularly the bank examiners win also find this research work of inestimable value.

By the time this research work have been completed, the research finding and recommendations win form a base that will be relied upon by other researchers who may wish to make further inquiries into the causes, consequences and solutions to fraud in Nigeria banking industry


The issue of bank fraud is such a topical one and has been basis for debate. The scope, therefore of this study was restricted to and concerned with those part of the topic of this research work, with the banking sector as a whole was the main focus of the study but particular attention was paid to UNION BANK OF NIGERIA PLC as we consider: frauds in the Nigerian banking industry: causes, consequence and solution.

The researcher however, decided not to include some details due to some limitation forming factors such as time, and hence, the research was restricted to certain area of the research work at a time, and as a result of the time limit for the completion of this research work, there was need or the researcher to be confined to some aspects.

Another limitation was financial constraint and hence not all branches of UNION BANK OF NIGERIA PLC nationwide were used as case study, but some of the branches concentrated in Lagos.


F or a good work to be done with regards to this research work, the researcher shall gather secondary data and information from various literature and works done on frauds in banks as are available in textbooks, financial and banking journals and from seminar papers delivered by eminent personalities in the financial sectors.

The researcher by means of questionnaire for quantitative analysis collected primary data. The open and self- administered type of questionnaire shall be adopted and distributed largely to staff (lower and higher cadre) of UNION BANK OF NIGERIA PLC and to their customer. In all, about 60 (Sixty questionnaires shall be distributed.

Chi-square (X2) shall be the statistical and quantitative analysis instrument to be used. The X2 text is an important extension of hypothesis testing and I used when it is wished to compare an. actual, (observed) distribution with a hypothesis for the expected distribution. It is often referred to as goodness of fit test. The formula for the calculation of X2 is given as:

X2= ∑ (O-E)2



Chapter one shall consist of what the research work is all about. It shall form the introduction to the research work. It shall consist of issues as justification for the study, aims and objectives of the study and what is intended to be covered in the other chapters.

Chapter two consists of the framework of reference within whose context conclusion can be evaluated. It shall be review of various literatures, in other words the theoretical framework.

Chapter three shall consist of the structural framework of the study.

Chapter four shall consist of the methodology, which are the techniques and tools for realizing or demonstrating the set objectives. In this chapter, the actual analyses are carried out, the result pressed an interpretation made.

Chapter five which is the last chapter shall consist of the summary of objectives. It shall also consist of recommendation after which conclusions are drawn, and suggestions for future work done.



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